As you approach retirement, taking control of your financial future becomes a priority. With flexi-access drawdown, you can withdraw lump sums or regular payments from your pension pot.
What is flexi-access drawdown?
Flexi-access drawdown puts you in control of how much income you take and when. With flexi-access drawdown, you’ll get:
- Flexibility: Withdraw a portion of your pension savings to provide an income, while leaving the rest invested.
- Tax-free cash: Up to 25% of the amount you move into a drawdown is tax-free.
- Freedom: Access your money as and when you need it.
Things to consider before withdrawing a pension
- Making sure your money lasts: Any pension income you receive needs to last for the rest of your life. Think about how much you’ll need and how you’ll manage it to make sure it won’t run out.
- Tax implications: Income withdrawal is classed as earnings and is taxed as such. If you’re still working or have any other form of income, taking money from your withdrawal fund could put you into a higher tax bracket. You could be left with a tax charge to pay HM Revenue & Customs (HMRC). It also limits how much tax relief you can claim on any pension contributions.
- Investment risks: The value of your investments can go up or down. It’s important to regularly review your investments to make sure they remain suitable for your needs. You’ll also continue to pay investment charges. If you don’t invest your money and leave it in your drawdown fund as cash, inflation could erode your income over time, and you could get back less than expected.
It’s important you read and understand all your retirement options before making any decision.
Why consider flexi-access drawdown and how does it work?
Flexible access
Flexi-access drawdown lets you take up to 25% of your pension savings tax-free. You can then withdraw a regular or one-off payment at any time.
Leave the rest invested
Keep the money in your drawdown fund invested. This could be in an Investment Pathway fund, or you can choose from other funds available. The value of investments can go down as well as up. If you don’t invest the money in your drawdown fund and leave it in cash, inflation could erode your income over time.
Review regularly
Keep an eye on your investments and adjust your withdrawals as needed to ensure long-term financial stability.
Changed your mind?
You can stop, start or change the amount of income whenever you need to. You can also transfer what’s in your drawdown fund to buy an annuity from an annuity provider that’ll accept it. You can’t cancel or return payment of any tax-free cash.
Different providers offer different options. We recommend you shop around to find the best deal for you.
Investment options in drawdown
You choose how to invest the money in your drawdown fund. This can be from investments available, or you could choose 1 of our 4 Investment Pathways. These are simple investment options that are based on your retirement plans for the next 5 years. Each pathway invests in an investment fund.
Investment Pathway 1
I have no plans to touch my money in the next 5 years
Your money will be invested in the Santander MyWealth Balanced fund.
This is a medium risk fund which aims to achieve long term capital growth whilst staying within set risk levels over a 5+ year term.
Investment Pathway 2
I plan to set up a guaranteed income within the next 5 years
Your money will be invested in the Santander Sterling Bond Portfolio.
This is a lower risk fund which aims for stable returns rather than high growth by investing in bonds (primarily corporate bonds).
Investment Pathway 3
I plan to start taking my money as a long-term income within the next 5 years
Your money will be invested in the Santander MyWealth Moderate fund.
This is a lower medium risk fund which aims to achieve moderate capital growth whilst staying within set risk levels over a 5+ year term.
Investment Pathway 4
I plan to take all my money within the next 5 years
Your money will be invested in the Santander MyWealth Cautious fund.
This is a lower risk fund which aims to achieve stable returns with some growth potential whilst staying within set risk levels over a 5+ year term.
Start your flexi-access drawdown
You can access your money in a few simple steps via the Santander app. Simply log on, click on ‘Your Pension’ then ‘Manage investments’. Once you are in the Investment Hub, click on your pension. Provided you are at the required age, you will see the option to withdraw.
Or, if you’d prefer to do it online, you can start your flexi-access drawdown in Online Banking.
There are no charges to access your money in our personal pension, though charges will still apply to the money you leave invested.
Useful information on flexi-access drawdown
You have a pension of £100,000 and decide to move £40,000 into drawdown. You can normally take 25% of this (£10,000) as tax-free cash. The remaining £30,000 moves into your drawdown pot, where you withdraw it as and when you need it (this is taxed income). The remaining £60,000 stays invested in your pension pot until you’re ready to take your pension benefits. You can use it to also top-up your drawdown pot in the future.
When moving money to a drawdown fund, you can normally take up to 25% of the money in your pension savings tax-free. Once paid, you can’t cancel or return the tax-free cash payment to us.
Any withdrawal you make after payment of tax-free cash is classed as income and taxed as such. We’ll take income tax from regular or one-off payments before we give it to you. The tax is paid to HMRC on your behalf. We’ll let you know how much tax that is when we pay you.
Withdrawing pension income or a lump sum could put you into a higher tax bracket and HMRC might ask you to pay more tax.
Tax-free allowance: HMRC limits the amount of tax-free lump sums you can be paid from pensions in your lifetime. This includes pensions you have with us and other pension providers. These limits are known as the Lump Sum Allowance (LSA) and the Lump Sum and Death Benefit Allowances (LSDBA). If you receive more than the allowance, you’ll have to pay tax at your marginal rate of income tax to HMRC. We’ll let you know the amount of any allowance used up when we pay you.
Yes. However, the first time you take money from your drawdown fund triggers the Money Purchase Allowance (MPAA). This reduces the amount of tax relief you can claim when paying into any pension scheme.
You can only claim tax relief on pension contributions paid before you reach age 75.
You can keep the same Investment Pathway option. However, both your investment choice and how much you withdraw can affect how long your money lasts – so it’s a good idea to review your choice regularly to make sure it still meets your needs.
With flexi-access drawdown:
- you’ll normally be able to take up to 25% of your pension savings tax-free. The other 75% is moved to a drawdown fund and invested in a fund or Investment Pathway of your choice. When you’re ready, you can take income payments as and when you need it.
For example, if you choose to take £10,000 tax-free, £30,000 would be moved to your drawdown fund. You can then ask us to set up regular income payments, stop payments or change how much regular income you receive.
With UFPLS:
- you take your pension in one go. 25% is tax-free (subject to the Lump Sum Allowance maximum), but the remaining 75% is paid out at the same time.
For example, if you took £40,000 as a UFPLS, you’d receive £10,000 tax-free. The other £30,000 would be paid at the same time and taxed as income.
Flexi-access drawdown allows flexibility in how you take your pension income. You can stop, start or change the amount of your income withdrawal payments at any time. The amount invested in your drawdown fund can go down as well as up. This means the amount of pension income you get can change too.
An annuity pays a regular guaranteed pension income for the rest of your life. It won’t go down in value. Once it starts, you can’t change how you’re paid or how much you receive.
Some providers offer enhanced annuities based on your health. It’s worthwhile to shop around to see what’s on offer. You can also find more details at moneyhelper.org.uk.
If you die with money remaining in your drawdown pot, this can be paid to your beneficiaries. An annuity can include a pension provision for a spouse/civil partner, but you must make it known you want one when buying the annuity.
When you set up a Personal Pension Account, you’ll be asked to nominate a beneficiary. This is the person you’d like to receive the remaining money if you die.
- If you die before taking any benefits, the full value of your pension pot is normally paid as a lump sum to your nominated beneficiary.
- If you die after flexi-access withdrawal has started, we normally pay any amount left in your drawdown fund to your nominated beneficiary as a lump sum.
If you’re under the age of 75 when you die and your death benefits are paid within two years from being notified of your death, any lump sums are normally paid free of income tax.
From 6 April 2027, most unused pension funds and pension death benefits will be included in the value of a deceased person’s estate for inheritance tax purposes. If your estate is more than the maximum limit, a tax charge will be due.